INTERNATIONAL VAT ASSOCIATION BRUSSELS 1 2 October 2007

2. Monday 1 st October 14:30 Welcome Martyn Redman 14:40 Secretary/Treasurer�s report Pamela Beighton 14:55 IVA Planning - Workshops Ryan Ostilly/ Martyn Redman 16.00 Coffee/Tea 16.40 IVA Planning � Workshop Feedback 17.25 Closing Remarks Martyn Redman 19:30 Cocktail reception Stephen Bill AGENDA

8. What it really means! Income against expenditure If ALL members paid their subscriptions we would still be �33,000 short for this years activities

9. So, how have we dealt with this? We had money in the bank at the end of last year Careful cashflow monitoring Subsidised Expenses Members Questionnaire & Additional subscriptions

10. What you can do Ensure your subscriptions are paid in good time! Encourage new members Support the Board with additional funding

20. Tuesday 2nd October 9:00 Welcome Stephen Dale 9:20 Update on the Commission�s Work Program Tim Hayes 10:30 Coffee 11:15 Comment from French Administration Cyril Sniadower 11.45 VAT groups in Belgium Inge Stuyver 12:30 Lunch 14:00 WORKSHOPS Consultation on Reverse Charge Stephen Dale Current text of Reformed 8th Directive Ryan Ostilly 15:00 Feedback 15:10 Money Laundering � Update Richard Yewdall 15:30 Coffee 16:00 ECJ Update Stephen Dale 16:20 AOB 16:30 Closing Remarks Stephen Dale AGENDA

22. VAT Forty years young April 1967 � 1st and 2nd VAT Directives 30 years after the 6th Directive now Directive 2006/112 50 years after the creation of the EC.

23. VAT Forty years young- but facing major challenges Major changes and challenges to the VAT system B�B services 8th Directive �Extended reverse charge� Joint and several liability Other �fraud� initiatives More compliance and reporting More � not less - burdens on business.

26. 26 International VAT Association Latest Developments from the European Commission Tim Hayes VAT and other turnover taxes unit European Commission

27. 27 Table of contents Background VAT strategy Topical, upcoming and dormant issues VAT package Fight against fraud Rates Proposals in the pipeline Planning

28. 28 Background Lisbon strategy Burdens on business Competitiveness

29. 29 VAT strategy launched in 2000 and updated in 2003 seeks to modernise simplify ensure more uniform application increase administrative cooperation

30. 30 Topical issues VAT package fight against fraud VAT rates

31. 31 Upcoming issues financial services Technical adaptations vouchers mechanism for elimination of double taxation

32. 32 Dormant issues travel agents postal services

33. 33 VAT package objectives ensure taxation of services where consumed facilitate discharge of obligations by non-established businesses modernise procedure for refund of VAT

34. 34 Current VAT package �slimmer� VAT package including: Modification of the place of supply of services Mini OSS Refund procedure

35. 35 VAT package in ECOFIN was discussed by ECOFIN on 5th June 2007 remains the priority of Member States ready from technical point of view some contentious issues still remaining Will be in place by 1st January 2010 at the latest

36. 36 VAT package - B2B services for services between Member States, taxation at place of customer becomes general rule still combined with a number of exceptions immovable property, cultural services, hiring of means of transport, restaurant services, intermediary services accompanied by new obligations (listing)

37. 37 VAT package - B2C services general rule of taxation at place of supplier remains combined with extended number of exceptions immovable property, cultural services, services supplied at distance, hiring of means of transport, restaurant services, intermediary services with discernable revenue impact

38. 38 VAT package - One stop scheme Mini OSS for EU operators: only for telecom, broadcasting and e-commerce services replicates the current scheme for third country operators Objective: ensure that, at least, changes in place of taxation are accompanied by facilitation measures provides single place of compliance for non-established taxable persons

39. 39 VAT package � VAT refunds leaves principles unchanged modernises procedure by introducing fully electronic procedure giving more legal certainty for businesses providing for better control

40. 40 VAT package � elements �parked� (1) �maxi� one stop scheme deduction rules luxuries, amusements, entertainment travel and accommodation restaurant and catering vehicles

41. 41 VAT package � elements �parked� (2) updating SME scheme with equal access Proposed maximum threshold of EUR 100 000 Objective: put all MS on equal footing Give flexibility to MS simplifying distance selling rules EU-wide threshold of EUR 150 000

42. 42 VAT package � why elements �parked�? Difficult discussion some parts not agreeable being kept for later more time necessary to reach agreement

43. 43 Fight against fraud a clear priority for all Member States aimed at identifying appropriate measures At first focused on reverse charge as tool

44. 44 Fight against fraud - background German and Austrian requests to apply general reverse charge for domestic transactions both rejected as too general to be covered by procedure United Kingdom request to use reverse charge in targeting certain sectors was granted agreed after discussions but more limited than asked

45. 45 Fight against fraud � taxation options applying reverse charge taxing intra-Community transactions: In Member State of departure In Member State of destination

46. 46 Fight against fraud � state of the discussions discussion is very much ongoing views vary considerably difficult to predict outcome Report to the December ECOFIN

47. 47 Fight against fraud - summary Conventional measures More far reaching measures Possibility of a pilot project?

48. 48 Reduced rates -background reform of reduced rates proposed in 2003 resulted in 2006 prolongation of experiment for labour-intensive services left obligation for the Commission to report on impact of reduced rates when applied to locally supplied services by mid-2007

49. 49 Reduced rates � Commission communication identifying possible future avenues of reflection Discussion launched in Council Formal proposal by Commission: after consultation of stakeholders Extension of derogations for new Member States

50. 50 Commission proposals in the pipeline - Technical adaptations Supply of gas and electricity: technical update and extension to district heating and cooling Rules on right of deduction Concept of �international bodies� for VAT exemption

51. 51 Commission proposals in the pipeline � Financial services Modernising the definition of exempt financial services and insurances Respecting limits of the current exemption ensuring that text better reflects the complexity and diversity of the modern industries new exemption for cross border cost sharing arrangements enable institutions to develop cost sharing and efficiency-driven consolidation without creating any new tax burdens Extending the existing option to tax these services which is currently at the discretion of Member States. more general choice for institutions to reduce exposure to non-recoverable tax.

52. 52 Planning 2008 - 2009 Vouchers and promotion schemes Public consultation Clear rules and legal certainty of certain types of vouchers (e.g. telephone cards)

53. 53 Planning 2008 - 2009 Mechanism to avoid double taxation When interpretation of facts by Member States is divergent Public consultation completed Public authorities & subsidies Ensure fair competition Result problems of outsourcing linked to non-deductible VAT Public consultation

54. 54 Thank you for your attention. Any Questions?

58. PricewaterhouseCoopers - ITX Topic Meeting VAT Grouping International VAT Association * Inge Stuyver

59. Objectives of the presentation Inform you about the main rules regarding VAT Grouping Inform you about the impact of VAT Grouping on businesses

60. Introduction

61. Objectives of the presentation Inform you about the main rules regarding VAT Grouping Inform you about the impact of VAT Grouping on businesses

62. Main rulesWhat is VAT Grouping?

63. Main rulesWhat conditions should be met? 5 conditions should be fulfilled simultaneously to apply VATGrouping: Taxable persons Establishment in Belgium (also fixed establishments) Financial link Economic link Organisational link

64. Main rulesWhat conditions should be met?

65. Main rulesWhat conditions should be met? � Financial link Current practice For B, C and D: no possibility to set up VAT Group as A is not part of VAT Group Future financial link For B and D: on the basis of 10%- rule For C: on the basis of presumption relationship of control

66. Main rulesWhat conditions should be met? � 50%-rule

67. Main rulesWhat conditions should be met? - 50%-rule

68. Main rulesWhat conditions should be met? � 50%-rule

69. Main rulesDuration, start and termination of the VAT Group Start of the VAT Group on the 1st day of the month following that in which (implied) approval given by the tax authorities Termination when one of the 5 conditions is not longer met (i.e. no financial, economic and organisational link)

70. Main rulesOther implications and points of attention Joint liability of all members for payment of VAT, fines and interests (new article 51ter of Belgian VAT Code) Place of supply rules � head office branch  Adjustments at entry � when leaving Anti-abuse rules apply (art. 19 bis Belgian VAT Code) No change in corporate tax or accounting rules Evidence still required to prove intra-group transactions No change in profit allocation Attention to cost-allocation in case of non-deductible VAT

71. Main rulesInput VAT deduction Application of articles 45 to 49 Belgian VAT Code and Royal Decree no. 3 as before Right to deduct VAT depending on destination (VAT taxable / VAT exempt / mixed) of bought-in services and goods concerned (same applies to business assets) Burden of proof regarding destination for VAT group

72. Main rulesWhat does it mean from a VAT point of view?

73. Objectives of the presentation Inform you about the main rules regarding VAT Grouping Inform you about the impact of VAT Grouping on businesses

74. Business impactWhat type of companies might be interested in VAT Grouping? Groups with a number of Belgian entities and important intra- group billings Groups with centralized car fleets Groups with companies with a limited or no right to deduct and high IT or building costs Groups with real estate companies Groups aiming to mitigate a VAT loss on M&A deal fees Other

75. Business impactGroups with important intra-group billings

76. Business impactGroups with centralized car fleets

77. Business impactGroups with companies with limited right todeduct VAT

78. Business impactGroups with real estate companies Invoering anti-misbruikbepaling in artikel 59 �3 W. BTW �Aan de administratie kan niet worden tegengeworpen, de juridische kwalificatie door de partijen gegeven aan een akte alsook aan afzonderlijke akten die een zelfde verrichting tot stand brengen, wanneer de administratie door vermoedens of door andere in � 1 vermelde bewijsmiddelen vaststelt dat die kwalificatie tot doel heeft de belasting te ontwijken, tenzij de belastingplichtige bewijst dat die kwalificatie aan rechtmatige financi�le of economische behoeften beantwoordt.� Inwerkingtreding : 1 november 2006Invoering anti-misbruikbepaling in artikel 59 �3 W. BTW �Aan de administratie kan niet worden tegengeworpen, de juridische kwalificatie door de partijen gegeven aan een akte alsook aan afzonderlijke akten die een zelfde verrichting tot stand brengen, wanneer de administratie door vermoedens of door andere in � 1 vermelde bewijsmiddelen vaststelt dat die kwalificatie tot doel heeft de belasting te ontwijken, tenzij de belastingplichtige bewijst dat die kwalificatie aan rechtmatige financi�le of economische behoeften beantwoordt.� Inwerkingtreding : 1 november 2006

83. Contents Preamble and objectives Key changes Food for thought Implementation Timelines Activity of IVA

84. Considerable problems with existing Directive Change refund notification periods Simplify and modernise with technology Pay interest on late refunds Strengthen rights of appeal by businesses

85. Refunds shall not be paid where VAT has been incorrectly invoiced � Art 4(a) Reemtsma ECJ implementation? Practice in refunding ZRS in France to change? Partially exempt businesses have right to refund � Art 6 Soci�t� Monte Dei Paschi di Siena ECJ Electronic claims to be addressed to Member State of refund, but submitted through portal of Member State of Establishment � Art 7

86. Additional information to provide electronically: Contact e-mail address of applicant - Art 8.1(a) Full address of supplier - Art 8.2(a) VAT ID and prefix of supplier � Art 8.2.(b) / (c) Partial exemption deduction and % � Art 8.2.(f)/(g) Good/Service code, reference to Art 9 � Art 8.2.(h) 10 good/service codes must be used � Art 9 Code 10 = �other�, which requires further explanation

87. Member State may request copy of invoice where: (Art 10) The �taxable amount� > Eur 1,000 > Eur 250 in the case of fuel Member State may request claimant to provide description of business activity codes � Art 11 9 month deadline , 30 September � Art 15.1 Electronic confirmation of receipt of claim �Immediate�, MS of establishment� Art 15.2 �Without delay�, MS of refund � Art 19.1

88. Claim thresholds changes as follows (Art 17): Quarterly claims Eur 400 (previously Eur 200) Annual claims Eur 50 (previously Eur 25) Member State may request claimant to provide description of business activity codes � Art 11 9 month deadline , 30 September � Art 15.1 Immediate confirmation of receipt of claim � Art 15.2

89. Decisions on claims within 4 months � Art 19.2 Payment 10 working days thereafter � Art 22.1 Query process may be invoked � Art 20 Within 4 months Send a request either to MS of establishment or to claimant Where validity and accuracy are �in doubt�, original or copy invoices may be requested and thresholds are ignored. Claimant has 1 month to provide the requested information

90. Decision on claims queried: - Art 21 Within 2 months after receipt of info from claimant; or If no response, within 3 months of raising query If more info is required, a decision must be made on whole or part of claim, within 8 months from submission Payment on claims queried to be made within these deadlines � Art 22.1 Appeals to be filed to MS of refund with same rights as domestic taxpayers� Art 23.2

91. Interest paid to applicant on late refunds: - Art 26 / 27 Does not apply if claims are queried and information is not provided within the 1 month period. From date when refund should have been paid Rate of interest to be the same as that applied to domestic taxpayers If not interest is available in domestic law, then the rate of interest levied by the administration on taxpayers will be used.

92. Dual systems : 8th and 13th directive 2 methods of submission 3 deadlines (incl UK 13th directive deadline) Tax certificates not required for 8th Dir Claims forms not required Powers of attorney? Ability to send claim / invoice information up front in anticipation of a query?

93. Implementation timeline Component of the �VAT Package� Political agreement in ECOFIN June 2007 Luxembourg veto on adoption Presidency seeking adoption Dec 2007 Implementation expected 01 Jan 2010

94. Activity of IVA Secure the role of the Agent / Fiscal Rep Reflect Agent role in software specification Agent / Fiscal Rep Facilitate the work of administrations Measure to reduce the risk of fraud Meet Member States and Commission Gilles and Stephen met French: 5 Sep 2007 Further meetings will be set up with others

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108. Money Laundering Directive 2005/60/EC Introduced new measures affecting businesses in the financial sector This includes tax consultants and VAT refund agents MONEY LAUNDERING

109. New measures will require: Identification Procedures Record Keeping Staff Training requirements Reporting procedures

110. Original legislation was primarily concerned with the proceeds of drug trafficking Now includes any �serious crime� including tax evasion

111. Customer identification required Beneficial owner to be identified Trust or foundation

112. Tax advice identified as the greatest risk Tax advisors who defend or represent clients in judicial proceedings not subject to reporting obligations in accordance with the directive

113. The Directive establishes detailed rules for customer due diligence Enhanced due diligence for high risk customers Includes relationships with high profile public figures from countries where corruption is widespread

114. The Directive applies to businesses including: Credit Institutions Financial Institutions Auditors,external accountants,tax advisors Real Estate agents MSB�s

115. Customer Due Diligence to be carried out: When establishing a business relationship carrying out transactions amounting to 15000 Euros or more Where suspicion of money laundering Where doubts about authenticity of customer ID

116. Measures include: Identification of customer from official documents or reliable independent sources Obtaining information on intended nature of business relationship Monitoring the relationship and scrutinising transactions to ensure consistent with instructions

117. Agents will have to ensure that adequate safeguards are in place where moneys go through bank accounts Measures to be applied to all new customers and existing customers on a risk sensitive basis

118. Enhanced due diligence required where: Customer not physically present for ID Additional documents required VAT Certificate Passport copy Company Registration Documents

119. Reporting Obligations Each Member State has a Financial Investigation Unit (FIU) Any activity which is complex or unusually large where reasonable grounds to believe that money laundering or terrorist financing

120. Reporting obligations do not apply where information received by tax advisors for the purpose of ascertaining the legal position or concerning judicial proceedings before during or after such proceedings

121. Registration requirements in each Member State Fees may be payable on an annual basis for each premises from where business conducted Penalties for failure to register or comply

122. Member States have to implement the Directive Rules should be similar in all Member States Tax advisors will be affected except where excepted through membership of recognised bodies such as Institute of Chartered Accountants or Law Society

123. Recommendations: Check if your business can be exempted by membership of professional association If not contact your local tax office or the FIU for details of how to register Information should be available on the Internet

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139. ECJ CASES C-277/05 / Judgment / 2007-07-18 / Soci�t� thermale d'Eug�nie-Les-Bains �No show� deposits are not subject to VAT Articles 2(1) and 6(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 are to be interpreted as meaning that a sum paid as a deposit, in the context of a contract relating to the supply of hotel services which is subject to value added tax, is to be regarded, where the client exercises the cancellation option available to him and that sum is retained by the hotelier, as a fixed cancellation charge paid as compensation for the loss suffered as a result of client default and which has no direct connection with the supply of any service for consideration and, as such, is not subject to that tax. The Court has not followed the position of the Advocate General who had opined that deposits retained by a hotel on the cancellation of a reservation by a customer are to be regarded as consideration for a taxable supply and not as compensation payments for loss.

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141. FRENCH CASES extending the principles defined by the ECJ Paris Administrative Court of Appeal / 2007-04-21 / SCA Pfizer Holding France Costs incurred for the transfer of securities / Overheads The Court decided that costs can only be regarded as overheads if they have a direct link with the whole business activity. The Court provides examples of overheads. On that ground, the Court decided that the company in question does not properly demonstrate that link by merely arguing that the transfer of securities is justified by financial constraints and by the purpose of reorganizing its distribution business in France. This caselaw deals with costs incurred for the transfer of securities and makes direct reference to ECJ caselaw rendered regarding the VAT recovery of expenditure involved in the acquisition of securities (ECJ, 8 June 2000, C-98/98, Midland Bank; ECJ, 22 February 2001, C-408/98, Abbey National; ECJ, 27 September 2001, C-16/00, Cibo Participation).

143. FRENCH REFORM Revision of the VAT deduction rules (2) They will come into force on 1 January 2008 and are based on the following principles: The direct attribution method will continue to take priority; (ii) Subsidies outside the scope of VAT do not impact the deduction ratio; (iii) The deductible proportion of VAT on company�s expenses will be determined by applying a deduction ratio, which is obtained by multiplying the three following ratios: a VAT liability ratio /�coefficient d�assujettissement� (previously the allocation key provided for in article 207 bis of Annex II, i.e. the apportionment between �expenses within the scope/expenses outside the scope of VAT�); -a taxation ratio/�coefficient de taxation� (previously the deductible proportions provided for in articles 212 and 213 of Annex II) and; - an eligibility ratio/ �coefficient d�admission�, which reflects the eligibility or not to deduct.

144. FRENCH REFORM Revision of the VAT deduction rules (3) They will come into force on 1 January 2008 and are based on the following principles: (iv) The variations in these ratios and in the use of the assets (if more than 10 %) should be taken into account for any adjustments which have to be made each year; (v) The new rules will also have an impact on the input VAT management processes of partially liable persons and their IT systems will have to be adapted accordingly. E.g. transactions outside the scope of VAT will have to be booked separately.

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148. ECJ OPINIONS C-442/05 / Opinion / 2007-07-10 / Zweckverband zur Trinkwasserversorgung und Abwasserbeseitigung Torgau-Westelbien Concept of single transaction The Advocate General Mazak has opined that the connection of the water distribution network to a property owner�s installation by a water supply undertaking for a separately calculated fee comes under the heading of ��the supply of water�/�Water supplies�� within the meaning of Sixth Council Directive 77/388/EEC of 17 May 1977 and should be regarded, with the water delivered to the dwelling in question, as forming a single transaction for the purposes of VAT.

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157. ECJ OPINIONS C-451/06 / Opinion / 2007-07-18 / Walderdorff Exemption / Concept of leasing or letting of immovable property The Advocate General Sharpston opined that the concept of leasing or letting of immovable property in Article 13B(b) of Sixth Council Directive 77/388/EEC involves assigning the right to occupy the property and to exclude other persons from it. It does not extend to a situation in which the owner of the property assigns the right to use it for a specific purpose but retains the right to use the property himself, or to authorise others to use it, for the same purpose or for other purposes

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